In a year characterized by record-breaking heatwaves and unforeseen geopolitical shifts, the UN Framework Convention for Climate Change's 29th Conference of the Parties (COP29) in Azerbaijan emerged as a crucial juncture in the pursuit of global climate leadership. This "Finance COP" was set to bring forth a new climate finance deal, yet it unfolded against a backdrop of geopolitical uncertainty, with the US election taking place just days prior to the conference's opening, casting a shadow of doubt over potential reversals of climate commitments. Azerbaijan's role as the host country also sparked significant debates, with critics raising concerns about the country's human rights record, democratic practices, and economic dependence on fossil fuel production.

Uniting for a Sustainable Climate Future at COP29

Climate Finance Deal: A Strategic Milestone

COP29 served as a strategic milestone in aligning with the broader goals of the Paris Agreement, with a particular emphasis on replacing the outdated $100 billion annual climate finance target, which was deemed insufficient to meet the needs of developing countries in combating climate change. At the outset of COP29, the Independent High-level Expert Group on Climate Finance presented recommendations, highlighting the need for increased climate investment across all economies, aiming for at least $1 trillion annually by the end of this decade, with a significant portion specifically directed at emerging markets and developing countries.However, the negotiations surrounding climate finance were fraught with intense divisions among the Parties. Developing nations advocated for $1.3 trillion annually, with at least $600 million coming from public sources. In contrast, developed countries proposed a more moderate financial target, both from public and private contributions. They also urged for the expansion of the donor base to include relatively wealthy, high-emitting nations like China and Saudi Arabia, which are still classified as "developing countries" based on the UN's initial classification in the 1990s.In the early hours of Sunday, the COP29 presidency released the final agreement. This deal sets a goal to mobilize $300 billion annually for developing countries by 2035, with developed countries taking the lead. It also establishes a long-term target to scale up total climate finance flows to $1.3 trillion per year by 2035. Currently, only 24 "developed" Parties are responsible for delivering this finance, and importantly, they are asked to "mobilize" funds rather than "provide," granting countries the flexibility to draw from the private sector.The $1.3 trillion target includes private sector finance but imposes no obligations; instead, it serves as a guiding signal for investment. Nevertheless, there is a growing business case for investing in climate action, and delaying further would lead to a significantly higher price tag in the long run. Delaying action could cost the global economy an estimated $178 trillion by 2070, while avoiding the costs of adverse climate impacts and reaping the co-benefits of climate action could boost global GDP by 15-18% by 2030.Business has a unique opportunity to take the lead by forging innovative financing partnerships, aligning investment strategies with climate goals, and collaborating to scale up the funding required to make greater progress.

Climate Action Plans: Charting the Path to Net-Zero

Another crucial aspect of COP29 centered around countries' national climate action plans, known as Nationally Determined Contributions (NDCs). In early 2025, countries are expected to submit updated NDCs. During COP29, several countries shared their plans ahead of the deadline, with notable examples including the UAE, UK, Brazil, and Switzerland. Brazil's plan aims to cut emissions by 59-67% by 2035 relative to 2005 levels and achieve net-zero by 2050. The UK set an ambitious target to reduce emissions by at least 81% compared to 1990 levels by 2035.NDCs serve as important signals to the private sector, outlining government policy directions and clarifying the trajectory of national economic transitions. Businesses play a crucial role as drivers of the net-zero transition, so it is essential that governments incorporate the voice of the private sector in developing ambitious NDCs. NDCs should include clear and sector-specific targets, providing an indication of the enabling political and regulatory environment intended to achieve the NDC. This, in turn, can provide clarity to the private sector regarding specific investment needs.

International Carbon Market Negotiations: A Step Forward

After nearly a decade of stalled negotiations, COP29 achieved an important agreement on the rules governing international carbon trading under Article 6 of the Paris Agreement. This agreement finalizes the rules for international carbon markets, enabling countries to trade carbon credits and collaborate more cost-effectively in reducing emissions.The two key elements of the agreement are the guidelines for country-to-country trading (Article 6.2) and the establishment of the Paris Agreement Trading Mechanism (Article 6.4). It is estimated that the full implementation of this agreement could reduce the cost of implementing national climate action plans by $250 billion per year.Article 6.4 recognizes that some Parties choose to engage in voluntary cooperation in the implementation of their National Climate Plans (NDCs) to allow for greater ambition in their mitigation and adaptation actions and to promote sustainable development and environmental integrity. However, nature-based solutions and the communities involved must not be overlooked. Further refinements to ensure safeguards on quality should be implemented. Cooperation with integrity initiatives, such as the Integrity Council for the Voluntary Carbon Market (ICVCM), will be crucial in further strengthening Article 6.2.While significant progress was made at COP29, effective scrutiny and further refinement of standards will be essential in 2025 to ensure that Article 6 delivers tangible benefits to communities and nature.

Transitioning Away from Fossil Fuels: A Call to Action

COP29 also presented an opportunity to implement the outcomes of last year's COP28 landmark Global Stocktake Agreement, which called for a transition away from fossil fuels and the alignment of climate pledges with the 1.5°C target. Unfortunately, the Parties were unable to reach an agreement to include clear references to transitioning away from fossil fuels, so these negotiations will be revisited at COP30 in Brazil.With the Global Stocktake in its implementation phase, businesses are already taking the lead in the transition away from fossil fuels by investing in renewable energy and scaling up clean technologies throughout their supply chains.

A Look Ahead to COP30 and Beyond

Throughout COP29, there was a growing demand for reform in the COP process. Former Climate Envoys and UN Secretaries-General emphasized the need to make COPs more inclusive, reduce the influence of petrostates, and shift the focus from negotiations to the implementation and delivery of concrete actions. While COPs should prioritize implementation, they still remain a critical platform for bringing stakeholders together and amplifying diverse voices to drive climate action.Furthermore, the COP Action Agenda, led by the COP Presidency for non-party stakeholders, provides a vital platform for the private sector to collaborate with governments in driving forward initiatives to implement climate action across sectors, value chains, and regions. With the increased emphasis on implementation, the Action Agenda can serve as a vehicle at the core of COP to demonstrate on-the-ground actions in support of outcomes aligned with the Paris Agreement.Looking ahead, COP30 in Brazil will be a significant moment. As a key five-year milestone, COP30 in 2025 will require countries to submit updated NDCs in alignment with the Paris Agreement. With unresolved issues from COP29 carrying over to the Bonn Intersessional in June and COP30, governments face high stakes in demonstrating ambition and unity.WBCSD will participate in COP30 to highlight how businesses are driving solutions for climate, nature, and equity, forging a bold path towards a more sustainable and equitable future.